Pension Plan Accused of Questionable
Investments

July 11, 2005 (PLANSPONSOR.com) - The Canadian
Commercial Workers Industry Pension Plan has been accused of
investing $280 million in improper investments, many tied to
Ronald Kelly, a convicted ex-priest.

The plan is the largest private-sector,
multi-employer pension plan in Canada with 240,000
participants, most of whom are members of the United Food
and Commercial Workers union, according to the Toronto
Star.
Union member Paul Whiteway expressed concerns that
initiated a two-year investigation by the Financial
Services Commission of Ontario.

According to the Toronto Star, the Financial Services
Commission of Ontario issued an 82-page report accusing the
plan of breaches of the Pension Benefits Act, including
failing to act in a prudent manner when making investment
decisions, e
xceeding regulatory limits in several cases of real estate
investments, failing to report potential conflicts of
interest, and failing to produce requested documentation.
Under the Pension Benefits Act the plan could face charges
and fines of up to $100,000 per incident, the newspaper
reported.

The newspaper itself investigated the plan and found
many investment ties with Ronald Kelly, an ex-priest who
pleaded guilty to 10 counts of indecent assault on 5 boys
in 1979.
The newspaper reported that fund records and other
regulatory filings show the plan invested more than $235
million with companies where Kelly had an interest from
1995 to 2002. The records indicate the plan invested at
least $142 million in the Caribbean ventures with Kelly
over a four-year period.
The plan also invested in other risky businesses that Kelly
had ties to, including a now-bankrupt potato processing
plant in Idaho and a shrimp factory in Newfoundland, which
sank in 2001, the newspaper said.
The company cut ties with Kelly, but continued to invest in
the Caribbean ventures.

The plan also invested at least another $110
million in loans, mortgages and equity into other risky
businesses, according to the regulator’s report and the
Star’s investigation.

The commission’s probe focused on the pension plan’s
investment committee, which at one time oversaw decisions
affecting about 45% or $446.8 million of the fund’s
assets.
T
he commission said the plan’s board of trustees does
not appear to have taken any steps to ensure the fund’s key
investment committee had the necessary expertise to decide
many ventures, according to the newspaper.
Since 2001 the board has dropped the responsibility of the
committee to less than 30% of the plans assets.

The newspaper said that in 2004 the plan notified
participants thatlow interest rates and difficult investment markets
had contributed to a lower growth rate of pension assets
meaning benefits for future retirees would drop 20%
effective January 1, 2005.

The commission has directed the plan’s board to fix
the fund’s decisionmaking processes, comply with investment
restrictions, improve monitoring, and conduct a complete,
independent due diligence review of the Caribbean ventures,
the newspaper said.
If the plan does not comply, the commission could take over
operation of the plan.

Bernard Christophe, the plan’s chairman, insisted
the fund is “sound” and has demanded that the commission
withdraw the report, saying it is “incomplete and
factually inaccurate”.